"Acquisition is still part of the game, but acquiring the right
customers is more important than ever," said Wes Nichols, CEO of
MarketShare Partners, which is growing a stable of bank customers
to address those very questions. "Analytics plays a very critical
role in making sure you're not only getting the right customers but
keeping the right customers and getting rid of the undesirable
Mr. Nichols isn't naming clients, nor is he exactly specifying
who those undesirables are, but suffice it to say they're lower
income and don't tend to generate a lot of fee income. They don't
have the money or inclination to use financial advisory services or
other higher-end service offerings. They may no longer qualify for
credit cards under tougher post-bubble lending standards, and
thanks to new regulations limiting retailer interchange fees on
debit cards, those transactions aren't particularly profitable
anymore either for the banks.
On the other hand, if you've got an extra $100,000 or so lying
around, your banker's still interested. Take Chase's latest offer:
$150 to anyone who would graciously deposit $100,000 and keep it
around for 90 days, even throwing in free transfers from savings to
That sounds like it would appeal, say, to the 1% of wealthiest
Americans. And right on cue, Occupy Wall Street , which claims to
represent the other 99%, followed it up with two marches focused on
Chase Bank earlier this month.
The segmentation for bank marketers is a little more precise
than that 1-to-99 split, but the fact is that a lot of that 99%
isn't as profitable anymore, thanks to lower loan demand and new
federal restrictions on fees.
Bank of America CEO Brian Moynihan described this bifurcated
reality on the bank's Oct. 18 conference call, where he announced
BofA beat analyst expectations last quarter, but saw net interest,
the difference between what BofA pays for deposits and gets in loan
interest, fall 0.4 points to 2.32%. Wells Fargo and Citibank
actually posted higher year-over-year profits, unlike BofA, but
also lower net interest margins, while profits and margins both
fell at JPMorgan.
BofA sees two broad customer groups: the retail customer and the
preferred customer group, and it continues to add resources to
growing the latter, but not the former. "Preferred includes small
business, so we've added financial-service advisors to help capture
the investment-side opportunity. We've added more personal bankers.
We've added more small-business bankers. And all that has generated
significant revenue growth," Mr. Moynihan said. "On the retail
business, it is more about optimizing the cost structure. ... This
quarter was another 25 or 30 branch reductions. Last quarter, it
was 60. And we continue to reduce that ."
Five years ago, banks profited even from customers who had
modest checking or savings balances, because they could make enough
money on the spread between low or no deposit interest rates and
loans. But post financial collapse, that 's not really
Today, a customer who keeps a $1,500 account balance might
generate $100 in revenue annually, if the bank is lucky, but cost
twice as much to service, said one banking executive speaking on
the condition of anonymity because he's not allowed to speak to the
media. Those costs come from mailing statements, paying tellers and
even owning ATMs, which can run as much as $500,000 to place, or
"about what it costs to put in a Burger King" in some cities.
Bank of America, the nation's largest deposit holder, caught
major flack last month for adopting a flat $5 fee for use of debit
cards, aimed at making up lost revenue from retailer swipe fees. It
was following such smaller banks as SunTrust and Regions in the
move, but resulted in an uproar that included criticism by
President Barack Obama and members of Congress.
Even before the Bank of America fee increases, many consumers
were in a sour mood regarding their banking relationships. In a
recent consumer survey by the Chief Marketing Officer Council, 32%
are "concerned" or "on the fence" about their banking
relationships, though 36 % have been with their current bank 10
years or more.
And some competitors big and small have been looking to take
advantage of anger over Bank of America's debit-card fee.
"I can definitely point out our debit card has no fees, and I'll
go one step further," Citibank CEO Vikram Pandit said at a Fortune
event Oct. 12. "I'd point out that we never charged overdraft fees
and we still don't charge overdraft fees."
He advocated "simple, transparent" ways to communicate to U.S.
Of course, Citibank is still getting its due.
A day earlier, the bank announced changes for customers of its
"midtier" checking accounts that pay interest, including a $20
monthly fee unless the customer has combined balances of $15,000 or
more in checking, savings, investment accounts or loan balances.
The fee previously was waived for accounts with balances of only
A more basic account has raised its monthly fee from $8 to $10
for checking accounts when customers' combined balances are under
$1,500, unless they have at least one direct deposit or use online
bill pay at least once a month.
But mass stampedes from one bank to another have yet to
materialize. The reality is , thanks to online bill paying and the
time it takes to set up transfers, switching banks is now laborious
for many consumers.
Last month Ally Bank, in the first TV ad from new agency Grey ,
sought to channel rage over bank fees its way, showing a man
standing at an ATM machine hesitating to hit the "accept" button on
a $3 ATM fee as various peers pressure him to just hit the
"My perspective is , even though everyone agonizes over their
products and rates, it's very hard to differentiate on pricing,"
said former Wachovia marketing executive Jim Garrity, now a
marketing consultant. "Service was always important, and it's even
more important now given that the playing field has been leveled by
all these regulations."